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It is February 1st, and Mavis plans to buy 10-year T-bonds with a face value of $5,000,000 on March 1st. If today's yield on 10-year
It is February 1st, and Mavis plans to buy 10-year T-bonds with a face value of $5,000,000 on March 1st. If today's yield on 10-year T-bonds is 4%, but Mavis believes that interest rates may decrease to 3% by March. What futures position should Mavis take to hedge this exposure? What would be her cost of purchasing the T-bonds net of any profit or loss on her futures position if the rate on 10-year T-bonds on March 1st was 5% p.a.?
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